With the harvest underway in the south of the country, analysts are forecasting this season's Spanish grain harvest to be "at least" a third lower than last season's bumper 23.2 MMT.

Spanish farmers' union Asaja say that this years grain harvest will only total 15.4 MMT, due to a combination of lower plantings and an acute lack of rainfall during March/April.

Other farm groups say that final production could come in as low as 13.5 MMT, a 42% decrease, as the harvest has not yet begun in the northern Castilla-Leon region that normally accounts for half the country's wheat production, where output is seen as much as 50% lower.

At the end of last year when farmers were making their planting decisions the costs involved in producing a 3.1mt/ha yielding wheat crop were around 600 euros, with 3.1mt of wheat at the time worth only 420 euros.

Many farmers therefore decide to either leave the land fallow or planted lower-maintenance crops like rape, sunflowers, field peas or vetches.

Spanish domestic cereal consumption is just under 30 MMT per annum. Even with a record carryover of an estimated 4.7 MMT of grain from the 2008/09 bumper crop, this leaves the country needing to import around 15 MMT in 2009/10 to cover it's needs.

With Spain the UK's top destination for wheat exports, this is potentially great news for us as they could easily take our entire reduced exportable surplus for 2009/10 in one fell swoop.

July soybeans closed at $12.45 ¾, down 21 ¼ cents, November soybeans at $10.77 ½, down 12 ¼ cents. Profit-taking was a feature ahead of the weekend, and despite the drop July beans still finished 20 ¼ cents higher on the week. Next week’s weather is forecast to bring some much-needed warmer temperatures into the Midwest which should aid rapid progress towards the completion of soybean plantings in the US. Monday will see the release of the May NOPA crush report, with the trade expecting 137.2 million bushels of beans to have been crushed during the month.

Corn

July corn closed at $4.26, down 15 cents on the day and 18 cents on the week. Corn planting should now be complete just about everywhere, as farmers switch their attention to getting the remaining beans into the ground. A stronger dollar and weaker crude oil was bearish for corn Friday, and there was also a sense of position closing ahead of the weekend, with funds selling an estimated 9,000 contracts.

Wheat

July CBOT wheat finished at $5.85 ½, down 9 ¼ cents on the day and 37 ½ lower on the week. The early harvest in the south is throwing up some very poor yields with reports of just 10 bushels/acre coming in from Texas. Yields should improve as harvesting progresses further north, but there still remains a distinct possibility that the USDA's lower winter wheat production figure of 1.492 billion bushels will need to be revised lower still. The bearish thing for wheat this week was that despite reducing production US ending stocks for 2009/10 were revised upwards due to lower usage. Global ending stocks were also raised by almost 1 MMT to 183 MMT.

Hot on the heels of the problems with wheat imports, it seems that the Egyptians have now got a problem with meat & bone meal imports, and a fairly sizable problem at that.

It appears that meat & bone meal shipped into Egypt must be certified "pork-free", Egypt is after all a mainly Muslim country and therefore not very pig friendly. You will recall the recent enforced mass-cull of every pig they could get their hands on held by the Christian minority following the outbreak of swine flu.

Well, large quantities of MBM shipped from South America to Egypt have all recently been impounded having tested positive for traces of pork. The Egyptians have, crucially, recently changed the way that they test for pork, but it would seem that they kind of forgot to tell anyone. MBM shipped from Argentina was certified pork-free when it left and pork-positive when it arrived.

The new method of testing, using DNA PCR analysis, is so hot it has found traces of pork in just about every consignment entering the country, causing a major headache for the South American exporters and the Egyptian buyers.

The Egyptian government are saying that this material cannot enter the food chain under any circumstances, no matter how minute the traces of "pork". Far Eastern buyers are now queuing up to take delivery of this material at knock-down prices, as shipments sit at the docks racking up huge demurrage charges.

In addition, as this material has never been customs cleared in Egypt, there is now a problem with documentation to "re-export" MBM to the Far East without the proper paperwork.

Meanwhile, the knock-on effect is that Egyptian buyers are suddenly faced with taking MBM out of the rations and replacing it with prairie meal, or something similar, with nearby prices reacting accordingly.

The eCBOT grains traded either side in the overnight session, but ultimately ended up in negative territory with July soybeans down 1 3/4 cents, corn 3 cents lower and wheat 10 1/4 cents easier.

In a reversal of yesterday, crude and metals were lower and the dollar higher, all dragging the grains down as the morning session wore on.

Crude oil dipped on ideas that the recent rally has been overdone, speculatively driven and without too much focus on demand. July crude currently stands $1.49 lower at $71.19/barrel.

For soybeans it's still all about old-crop tightness. The US will not run out of beans everybody keeps re-assuring us, prices will ration demand, China have more than enough and will go away etc.

The USDA projected ending stocks at 110 million bushels earlier this week. That might be the lowest for 32 years, and the tightest stocks to usage ever, but it's still a surplus isn't it?

Well, that's true, but where were the physical ending stocks last year when the September contract closed more than four limits up on the last day of trade? They were more than double then what they are projected to be this year, but physically where the hell actually where they? Nowhere to be seen, floating around in the USDA ethereal, that's where they were.

The Ensus bioethanol plant at Wilton on Teesside, the largest of its kind in Europe, is expected to be up and running before the end of the year. With an anticipated wheat requirement of 1.1 MMT, that is going to make a sizable dent in next season's exportable surplus.

After winter wheat was planted late and in largely unfavourably wet conditions, many crops looked in pretty poor shape after a much drier than normal Feb/Mar/Apr. A return to more normal British conditions of rain, interspersed with the odd few days of temperatures in the 70's and even low 80's in May, have the crop looking in much better shape now.

Even so, it seems highly unlikely that we will get the same bumper yields as last season, with the UK crop at the moment seeming likely to come in at somewhere between 14.2-14.6 MMT in 2009.

With the extra demand from Ensus, assuming of course that they do indeed buy British, this would make the UK's exportable surplus for the 2009/10 season maybe only a million tonnes or so, much more manageable than the 3 MMT+ we had in 2008/09.

The pound is steady this morning, holding close to multi-month highs against the dollar and euro, supported by news from the Bank of England that inflation is expected to rise to 2.4% in the coming year, the first rise since last August and up from 2.1% in February.

That might indicate the need to raise interest rates somewhere not too far down the line, which would be supportive for sterling.

Comments from Alistair Darling in today's FT that he was "confident but cautious" over the prospects of recovery in the UK, appear to be being greeted as if he has the remotest idea what he's on about. The caterpillar-eyebrowed one said that the failure of other European nations in cleaning up their banks and rising oil prices are still a threat to economic recovery. (So if/when it all goes tits-up again it's circumstances beyond his control).

Can you just imaging the smug little look on his face? "I haven't got a clue really, and it's all down to pure luck that things are going my way, but I'm going to sit here and take the credit for it and pretend that it's all my doing. It's just fortunate for me that nobody else seems to know what they're doing either."

"I might just pop over to the G8 meeting in Italy this weekend and give those lads the benefit of my opinion on things, let them know how I've managed to turn this ship around, throw them a few pointers like."

Crude oil is lower this morning, down half a dollar to $72.08, having briefly popped up above the $73/barrel mark yesterday after the International Energy Agency (IEA) upped its forecast for global consumption for the first time in almost a year.

The IEA said that world demand for crude would be 83.3m barrels/day due to increased demand from China and the US.

The market is taking a bit of a breather from 8-month highs today on ideas that the recent rally might have a lot more to do with speculative money than demand.

The FTSE, DAX and CAC are all broadly unchanged in early trade this morning.

Barclays has sold its fund management arm, Barclays Global Investors, to US asset manager BlackRock for £8.1bn.

The West Bromwich Building Society has agreed a deal to convert its £182.5m subordinated debt into capital to stave off insolvency.

Troubled TV sports channel Setanta is trying to dig itself out of a hole by agreeing to pay £20 million to show the World Origami Championships from Osaka live on national TV. Customers will only be able to watch it on Paper View.

The Canadian Wheat Board project a western Canadian wheat, durum and barley crop of 29.7 million tonnes in the 2009 crop year, down almost 20 per cent from last year’s 36.7 million tonnes and significantly below the five-year average of 33.9 million tonnes. The all-wheat yield estimate announced by the CWB yesterday, at 33.4 bushels per acre, is the lowest initial projection in seven years.

“Cold weather across the Prairies this spring has had a detrimental effect on planting and early crop development in most growing regions,” said Bruce Burnett, CWB director of weather and market analysis. “In addition, soil moisture levels are dangerously low in parts of Alberta and western Saskatchewan, where dry conditions have persisted since last fall.”

Alberta is experiencing the driest conditions since 2001. Subsoil moisture in the province had deteriorated to 38% poor, 42% fair, 19% good and 1% excellent, as of June 4th, according to the Alberta crop lettter.

While the western Prairies are abnormally dry, Manitoba has been excessively wet this spring, with seeding still incomplete. Without ideal growing conditions for the remainder of the crop year, below-average production is likely for Western Canada, Burnett said.

Wheat, durum and barley crops are currently about 10 days to two weeks behind normal development due to the cold weather. Production estimates have dropped significantly in the past two weeks from what had been average yield expectations. “As cool weather delays crop emergence, the risk of reduced quality or frost damage this fall increases,” he added.

The CWB peg 2009/10 non-durum wheat production 18% lower at 16.4 MMT, durum wheat output is seen 20% down at 4.4 MMT, and barley output declining 20.5% to 8.9 MMT.

Note, these numbers are for western Canadian production, a small amount of wheat also comes out of the east (around 3.1 MMT in 2008).

July soybeans closed at $12.67, up 21 cents; November soybeans finished at $10.89 ¾, up 10 ½ cents. Nearby July meal was limit up at one point on both spec and crusher buying, but faded into the close to finish up $14.60 at $428.00. Old crop stocks remain ludicrously tight, there seems to be two sides of a story developing here. Story a, the last two weeks have seen negative old crop sales due to cancellations/deferrals, price is rationing demand. Story b, the lack of supply from Argentina is forcing way more export sales to be made from the US than is normal at this time of year, the late planting of US beans, leading to a late harvest could mean that the US run out of beans.

Wheat

July CBOT wheat closed at $5.94 ¾, down 1 ¼ cents, despite having traded higher for much of the session. There isn't really a whole lot of fresh news for wheat. The USDA dropped 2009 winter wheat production by 10 million bushels, nut also lowered usage by 20 million, increasing ending stocks by 10 million. The weak dollar was supportive for wheat, but more export demand is wanted to underwrite current prices.

Corn

July corn finished at $4.41, up 5 ¼ cents. Weekly export sales were strong yet again for corn, and crude was higher and the dollar lower, providing underlying support. Yesterday's USDA report was mildly supportive for corn, especially so for new-crop months. Any further delays in US plantings should help long-term corn levels.

The markets have fallen substantially this week, with London November feed wheat down GBP8.65/tonne already since last Friday's close.

Yesterday's USDA report was bearish on wheat, particularly for new crop, although plenty of potentially bullish factors remain yet to be factored into this market. For example, the USDA pegged 2009/10 Argentine wheat production at 11 MMT, despite the fact that plantings are seen down at least 30% this year from a crop that only yielded 8.3 MMT in 2008/09.

There are still major problems in Eastern Europe over wheat production this year, but it may take another month or two, once early harvest reports filter through, for the extent of potential crop losses to become apparent.

The overnight grains closed firmer, with nearby beans up 14 cents to $12.60/bu, corn up around 3 cents and wheat 5-6 cents firmer.

Once again a weak dollar and firmer crude oil is supportive for the grains. The US Energy Dept. said that crude stocks fell 4.4 million barrels last week, much more sharply than had been anticipated. Chinese crude oil purchases and imports were also up.

The USDA's weekly export sales report was bullish for corn and wheat and bearish for soybeans. Beans saw negative sales for old crop for the second week running, however with the USDA yesterday reporting a stocks/usage of just 3.6% the supply side remains incredibly tight.

The US weather may be finally set to play ball, according to QT Weather's Allen Motew. The corn crop has finally transitioned to wanting timely, periodic moisture and no sustained heat, and it looks like it will get it for the remainder of this month, he says. Despite several potentially damaging “scares” of strong ridging and temperatures soaring to 100 degrees later this month. The good news is these conditions will be part of the “roller-coaster” ride of “quick peaks” of intense heat and “valleys” of cooling rains for the remainder of the month, he adds.

The USDA weekly export sales report for the period May 29-June 4, 2009 highlights:

Wheat: The USDA reported better than expected net sales for the 2009/10 marketing year, which began June 1, of 353,900 MT. The details of the sales are a bit complicated this week, as the new marketing year for wheat began halfway through the period. A total 630,700 MT in sales were carried over from the 2008/09 marketing year, which ended May 31. Exports for the period May 29-31 of 347,200 MT brought accumulated exports to 25,973,000 MT, down 20 percent from the prior year’s total of 32,563,500 MT. Exports for June 1-4 totaled 75,600 MT, with Nigeria (49,900 MT), Japan (8,200 MT), Mexico (6,300 MT), the United Kingdom (3,500 MT), and Trinidad (2,800 MT) being the main destinations.

Corn: Net sales of 713,100 MT of old crop were up 18 percent from the previous week, but down 4 percent from the prior 4-week average. Increases reported for Japan (296,200 MT), Taiwan (102,200 MT), Mexico (95,300 MT), Colombia (43,300 MT), unknown destinations (43,200 MT), Syria (27,000 MT), and Peru (25,000 MT). There were also net sales of 149,900 MT for delivery in 2009/10. Pre-report trade estimates had been for combined net sales of 500,000 to 850,000 MT.

Soybeans: Net old crop sales reductions of 61,000 MT were reported this week, primarily as a result of for unknown destinations (73,500 MT) and China (55,000 MT). Net sales of 280,100 MT for 2009/10 delivery resulted as increases for unknown destinations (226,500 MT, including 91,500 MT switched from the 2008/09 marketing year), Mexico (53,600 MT), and Cost Rica (8,000 MT). Pre-report trade estimates had been for combined net sales of 200,000 to 400,000 MT.

Reaction: negative old-crop bean sales were disappointing, but no great surprise. The unknown/Chinese cancellations were more than matched by fresh sales to unknown in new crop, indicating that Chinese crushers are probably rolling purchases forward rather than cancelling outright.

Corn sales were strong again, as too were wheat sales for once. Pre-report estimates for wheat were 200-300,000 MT. Interesting too to see the UK in there taking 3,500 MT last week.

Milk Link has announced that it has completed its acquisition of the Llandyrnog cheese creamery in North Wales.

The acquisition which was negotiated with PriceWaterhouseCoopers, receivers to Dairy Farmers of Britain, was undertaken for an undisclosed sum. The transaction secures the future of the Welsh creamery, preserving jobs and safeguarding the livelihoods of approximately 300 dairy farmers.

Neil Kennedy Milk Link’s Chief Executive said, “The acquisition of Llandyrnog is another positive development for Milk Link and reinforces our leadership of the British cheese market. The creamery in terms of its assets and staff, the products and brands it produces, and its customer base are of good quality and we believe that it will be an important contributor to our value added processing business.

“In securing the future of the creamery, we have also ensured that there is a long term requirement for high quality milk produced by dairy farmers in North Wales, Lancashire and the Midlands. In the last couple of days our milk procurement team have signed up over 200 farmers and we are confident that we will have secured the milk required for the creamery by the end of this week.

“Looking forward we will now focus on developing the business using as a basis the undoubted quality of the cheese it produces.”

Stephen Oldfield, joint receiver and manager of Dairy Farmers of Britain Ltd, said: “We’re pleased to announce a sale that secures jobs for all the Llandyrnog Creamery workers and new milk contracts for the relevant farmers a week into our appointment and wish Milk Link well with their new acquisition. There was significant interest in the plant as it is modern and has a clear differentiated offering of Welsh traditional cheese. We’ve been grateful for the support of farmers, hauliers and employees in keeping the milk flowing and the cheese maturing while a suitable sale was agreed.”

It turns out that the president of GAFTA was missing from the annual dinner in London last night. Ashraf El Attal, is also the chairman and chief executive of Egyptian Traders Co., one of the companies at the centre of the recent spat between Egypt and Russia over wheat quality.

Meanwhile a second 56,000 MT cargo of Russian wheat aboard MV Seabird brought into Egypt by the same company has also been seized, according to media reports.

The Russian exporter of this shipment is demanding its immediate release, so that the vessel can be re-routed elsewhere, as they have already done earlier this week with a third consignment which has now been redirected to the EU:

Hurrah! The recession is over according to the National Institute of Economic and Social Research. They say that although the economy shrank by 0.9% in the three months to May, the low point was March. Since then things have got a whole lot better with GDP expanding at a monthly rate of a whopping 0.2% in April and 0.1% in May!

Is it just me, or is the market currently desperately clutching at straws here. Desperately clinging onto any little nugget of positive information, and ignoring the deluge of bad news?

Well, some people seem to believe that a recovery is underway, and they are prepared to back their judgement with hard cash. The pound is up to its highest levels of the year against the euro, currently standing at 1.1744. Meanwhile against the dollar we currently stand at $1.6466, showing a net gain of almost 5 cents on the week.

Crude oil broke through the USD72/barrel mark this morning, to hit its highest levels since October 2008, after the US Energy Dept. said that US inventories fell by a surprising 4.4 million barrels last week.

This was well above market expectations of a 100-400,0000 barrel draw down. US gasoline stocks fell double what was expected and distillate inventories also declined.

Meanwhile Chinese purchases rose to a 14-month high in May, of 3.9 million barrels/day, other data revealed. Chinese imports during May were also the second highest in record, up 5% from a year ago.

For the bulls to get this market going again they need some input on the demand side, it seems that China, with its massive spending on improving its infrastructure, might be providing it.

It's all gone wrong for Argentina, the eighth largest country in the world, the fifth largest exporter of wheat in the world just two years ago, and the world's largest consumer of beef per capita.

Crippled by drought, inflation, punitive taxes and crippling red tape the agricultural sector has gone to the dogs.

Amid raging inflation the government of President Cristina Fernández de Kirchner is trying to control food prices by sporadically preventing their export. and what is allowed to leave is being taxed to the hilt.

In the grip of the worst drought the country has seen for 70 years, coupled with an acute lack of credit, farmers are scrimping on fertilisers to replenish the soils they plunder.

Already expected to plant the smallest wheat crop since records began a hundred years ago, the Buenos Aires Cereals Exchange warn that plantings are likely to fall significantly lower than their most recent estimate of 3.2 million hectares.

In 2008, for the first time ever, Argentina exported less beef than Uruguay, despite being almost fifteen times bigger.

One farmer interviewed by the Scotsman said that the country is expected to have to import beef as from 2011, and will only have enough wheat to cover internal consumption next year – and that is only if it starts to rain.

"Even if it does rain, most farmers are looking at alternate grains such as oats, barley and any other product that does not involve an export tax," he added.

"The country considered to be one of the breadbaskets of the world is falling towards international oblivion."

July soybeans closed at $12.46, up 2 ½ cents, November soybeans finished at $10.75 ¼, down 2 cents. The USDA lowered old crop US ending stocks to 110 million bushels, a little below the average trade guess and the tightest on a stocks to usage basis EVER. New crop ending stocks were also reduced to reflect the lower carry-in. No account seems to have been made for potentially larger plantings this year due to the weather delaying corn seedings. Trade estimates for tomorrow’s export sales report for soybeans are 200,000 to 400,000 MT. This report will be keenly scrutinised to see how sales are holding up for the twelve remaining weeks of the marketing year, and whether China are seen cancelling/rolling any US purchases.

Corn

July corn closed at $4.35 ¾, down 8 ¼ cents. The USDA decreased US 2009 corn yields by 2 bushels/acre in today’s report accounting for the planting delays to the corn crop in the eastern Corn Belt. No account was made for potentially lower plantings due to these weather delays however, that may have to come in next months report, which might be potentially bullish new crop. Trade estimates for tomorrow’s export sales report are 500,000 to 850,000 MT.

Wheat

July CBOT wheat closed at $5.96, down 17 ¾ cents. Today's USDA report was always likely to be more about soybeans and corn than wheat, yet the one main surprise from the USDA was raising 2009/10 ending stocks significantly above trade expectations. Winter wheat production was lowered, but reduced exports next season more than offset that. Trade estimates for tomorrow’s export sales are 200,000 to 300,000 MT.

EU wheat futures prices fell sharply Wednesday following some bearish stocks estimates from the USDA, and a sharply weaker dollar.

The USDA raised US 2009/10 ending stocks to 647 million bushels, from 637 million last month, and well ahead of the average trade guess of a fall to 606 million.

Global wheat stocks are also projected to rise for the coming season to 182.65 MMT, from 158.1 MMT in 2008/09 the USDA said, although these figures are in direct contrast to estimates from the IGC which sees stocks declining by 15 MMT in 2009/10.

Paris November milling wheat closed down EUR4 at EUR151.50/tonne, and London November feed wheat ended down GBP3.25 at GBP122.75/tonne.

FranceAgriMer, a newly formed French government body incorporating the likes of ONIGC, said that French soft wheat ending stocks will decline to 3.2 MMT from the 3.9 MMT forecast last month as exports have been above expectations.

A sharply weaker dollar added to the woes of EU wheat today, with the pound rising to $1.6350 and the euro to $1.3980 as investors back away from the US unit in search of higher-yielding assets.

Yawn. The winter wheat production number and all the 2008/09 ending stocks figures were very close to the average trade expectation, if all slightly under.

The much awaited soybean ending stock figure was reduced to 110 million bushels (less than a fortnight's supply), with the ever-conservative USDA predictably freaking out at the very notion of dipping below 100.

For next season's carryout corn and beans again came in almost spot on what was expected, with only wheat coming in a little higher than anticipated.

For 2009/10 they dropped the corn yield by 2 bushels/acre reflecting late plantings. For wheat lower production was more than matched by reduced usage, giving us higher 2009/10 ending stocks.

With most of the numbers coming in bang in line with expectations it will probably only take half an hour for the markets to start looking ahead, and consign these figures to the history folder.

Tomorrow's weekly export sales is next in line for scrutiny. Will there be any Chinese cancellations for beans? Will corn sales hold up? Does anybody want US wheat? We'll find out tomorrow.

China's drought-stricken Heilongjiang province has had some rain, with potentially more to come say StormX.

In the US an abrupt shift may soon occur across Missouri, Illinois, Indiana and Kentucky from a spring with too much water (too cold in the Western Corn Belt and northern Plains) to experiencing the beginning of summer with stressing heat and lack of moisture, says Allen Motew of QT Weather. Indications are that summer will come in strong, being hot and dry for much of the Plains and western Corn Belt, he adds.

Meanwhile crude is steady at $71.33/barrel, Wall Street is expected to come in higher, metals are firmer and the dollar is weaker. All those outside influences point to higher trade today.

UK dairy business Milk Link today announced its results for the year ended 4 April 2009.

Key financial highlights included:

Turnover increased from £523 million in 2008 to £547 million in 2009 (+4.6%); whilst turnover per litre increased from 37.7ppl in 2008 to 42.7ppl (+13.3%).

Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA), reduced from £30.5 million in 2008 to £28.7 million in 2009 (-5.9%). This reflected the higher milk price paid to Members, the need for less profit to be retained in the business to meet bank covenants and the absence of cheese stock profits enjoyed in the previous year.

Profit Before Tax (excluding exceptionals) increased from £8.9 million to £10.1 million (+13.5%).

Operating costs reduced to £81.7 million from £83.6 million (-2.3%), despite significant increases in input costs, particularly those relating to energy.

Operating cash flow was £23.9 million - up from £17.0 million on previous year (+40.6%).

Net bank debt fell by £8.5 million to £76.1 million – down from £84.6 million at March 2008.

Total Member funds rose to £60.9 million as at year end.

Group gearing improved from 1.66 times to 1.25 times.

Average Member milk price paid out across the year increased by 4ppl to 25.6ppl.

Processing Interest Payment relating to 2008/09 financial year increased to £4.1 million representing a 10.8% return on Members’ Qualifying Loans.

Founded in 2000, Milk Link says it is the UK’s most progressive integrated dairy producer and processor. Wholly owned by British dairy farmers it processes their milk into a wide range of high quality dairy products including long life milk, creams, flavoured milks, custards, milk powders, yoghurts and dairy ingredients, supplying all of the UK’s major retailers and many of its leading food service and food manufacturing organisations. It is also the UK’s largest manufacturer of cheese, making a comprehensive range of award winning British cheeses.

The pound is up again this morning at $1.6407 against the dollar and 1.1620 against the euro, as PM Gordon McBroon soldiers manfully on, tied to the mast - hang on, there's a song in there isn't there?

Every time just like the lastOn his ship, tied to the mastTo distant landsHe's lent our poundsWithout a frown from Gordon Brown

Anyway, the sight of Mr McCharisma soldiering manfully on in the face of adversity is apparently sufficient to encourage a few foolhardy punters to put their money into sterling this morning.

And that is despite the news that the UK's visible trade deficit rose to GBP7 billion in April, from GBP6.5 billion in March, when a small decrease to GBP6.4 billion had been expected.

Yesterday's news that that UK house prices fell at their slowest pace in one and a half years is offering some encouragement that Mr McBroon is capable of steering us safely through the choppy waters of recession.

If risk appetite is what you're after then you've come to the right shop.

After a bumper harvest in 2008/09 helping replenish dwindling global grain stocks, it's back to business as usual in 2009/10 with world demand outstripping supply by 15 MMT, say the International Grains Council.

Global grains production is projected at 1,721 MMT in 2009-10, compared with the demand of 1,736 MMT, say the IGC. The production number is down 61 MMT from output 1,782 MMT last year.

"World grains production is expected to fall short of use (demand) in 2009-10, eroding some of the gains in stocks achieved after the bumper 2008 harvests," they say.

There will be more use of grains for food and industrial purposes in 2009/10, particularly for ethanol production, the IGC said.

The IGC estimate global wheat output to be down by 5 per cent at 652 MMT (4 MMT higher than the current Nogger estimate - see table to the right) in 2009/10, compared with 687 MMT in 2008/09.

Crude oil is up above $71/barrel for the first time in seven months this morning, after the American Petroleum Institute slashed its US stocks estimate by almost six million barrels last night. At 8am London time July crude was $71.09/barrel, just below the intra-day high of $71.18, and $1.08 up on last night's close of $70.01/barrel.

US inventories dropped 5.96 million barrels to 357.9 million last week, the API said. That reduces stocks to their lowest since March, spurring ideas that a global economic recovery is round the corner and that the worst of the recession is over.

A sharply weaker dollar also contributed to oil's strength, falling to $1.6370 against the pound and $1.4079 against the euro, also largely on the belief that a recovery will lead investors to shy away from low-yielding US assets.

The US Energy Dept. will report it's stocks data later today, whilst a reduction seems likely, the magnitude of it may well not be anywhere near as great as the API are saying.

US refineries are expected to have upped capacity slightly to around 86.5% last week in response to a modest pick-up in demand from the summer driving season.

Much of the reasoning behind oil's recent rally can be attributed to the re-emergence of fund and speculative money back in the market. There have already been calls for the CFTC to keep a very close eye on the lack of convergence between cash and futures markets. Somehow I don't see them wanting to discourage any kind of money coming back into the fray. If they didn't want to do it twelve months ago, they are certainly likely to stand aside in the current climate.

July soybeans closed at $12.43 ½, up 11 cents, November soybeans finished at $10.72 ½, up 20 ¾ cents. Beans were supported by higher crude, which closed above $70/barrel posting the highest close since Nov 4th, and a weaker dollar. The outlook for a very tight old crop ending stocks figure tomorrow from the USDA was also supportive for beans. The average trade estimate is for ending stocks to be trimmed to 114 million bushels. That’s less than a 2 week supply at current usage rates.

Wheat

July CBOT wheat closed at $6.13 ¾, up 15 ¾ cents. Spring wheat plantings are just about finished with 4% of the crop remaining to be sown nationally, and 6% of the crop in top producing state of North Dakota unseeded. With new crop soybeans at $10+ almost all of the unplanted acres will surely get switched into beans. The USDA will probably lower it's production estimates for US wheat in 2009 and consequently lower 2009/10 ending stocks due to late plantings.

Corn

July corn closed at $4.44, up 9 cents. Weather conditions in the US continue to delay plantings, and things aren't likely to get much better over the next few days according to QT Weather. The impact of high soil moisture and cooler, wetter weather over the Corn Belt this season will likely impact the 2009/10 corn ending stocks which will be reported in Wednesday’s USDA report. Crude oil pushing above $70/barrel and a weaker US dollar were also supportive for corn today.

EU wheat futures closed mixed Tuesday with Paris November milling wheat closing up EUR1.50 at EUR155.50/tonne, and London November feed wheat ending down GBP0.75 at GBP126.00/tonne.

Firmer outside markets helped stem the flow of recent losses. A strong pound was negative for UK wheat, but helpful for grains on the continent however.

Generally the market remains in a sideways mode, farmers are reluctant sellers with large premiums still to be made for new crop positions.

Consumers are reticent buyers though, concerned over the magnitude of demand for compound feed, especially in the light of the plight of the dairy sector.

Dryness in Eastern Europe is still a threat to wheat production in those areas, and there is still a question mark over exactly how low US output will be this year.

In Argentina, planting prospects are dismal, Informa this week lowered their production estimate to 9.9 MMT, but with plantings expected 30% lower than a year ago (when production was only 8.3 MMT) there is still plenty of room for a much more sizable downwards revision yet.

The overnight grains closed with beans around 6-8 cents higher, wheat up 6-9 cents and corn around 4 cents firmer.

July beans hit a nine month high of $12.41 1/4 earlier in the session before settling just below that level at $$12.39 3/4.

Crude oil is $1.26 higher at $69.35/barrel, whilst the dollar is sharply weaker slipping to $1.6240 against the pound and $1.4012 against the euro. The dollar is losing ground today on ideas that a global economic recovery later in the year may lead to a move away from the perceived safety of dollar-based assets.

The dollar has fallen almost 19% against sterling, and by 12.5% against the euro since the beginning of March.

On the weather front in the US getting late-planted beans into the soggy soils of Illinois and Indiana is turning out to be a struggle just like for corn, says Allen Motew of QT Weather. The southern agricultural districts of Illinois and Indiana still have more than half their beans to plant (so far, 41% planted S Indiana/21-47% C and S Illinois) and more rain is on the way, he says, with the next three days bringing three to four inches for Missouri, Illinois, Indiana and Kentucky.

Japan is shopping for 124,000 MT of wheat this week, with around half likely to be US origin. Taiwan also bought US wheat overnight. Russia & Egypt finally seem to have reached an accord over the recent quality problems between the two countries. Iraq has bought 250,000 MT Australian/Canadian wheat.

More book-squaring ahead of tomorrows USDA S&D and stocks reports can be expected in what might be a relatively subdued session.

Early calls for this afternoon's CBOT session: July corn called 3 to 5 higher; July soybeans called 6 to 8 higher; July CBOT wheat called 5 to 6 higher.

July soybeans hit a nine-month high in overnight trade Tuesday, spurred on by a weaker dollar and firmer crude oil. On the eBOT July beans hit $12.41 1/4, the highest since Sept. 4th.

Wheat and corn followed beans higher, with July wheat 9 1/4 cents higher and corn up 4 1/2 cents.

The dollar is weaker on hopes of an economic recover in the second half of the year. That would mean a loss of safe-haven status for the US unit as investors seek higher yielding assets.

There is talk that the Chinese government may soon begin selling soybeans from its state reserves, although these stories are unconfirmed. Traders say it is possible, but a final decision may not be made until the government has finalised corn sales first.

Meanwhile, China will import an all time record 4.62 MMT of soybeans in June, according to the country's Commerce Ministry.

Last night's USDA crop condition and planting reports threw up few surprises. Corn plantings have just about caught up at 97% done as of Sunday night. Beans are seen 78% planted, compared to 87% normally and spring wheat is 96% planted, compared with 100% normally.

The main areas of concern are Illinois where bean plantings are well behind at 59% done as opposed to 88% normally and Indiana corn at 90% complete against 98% normally. For spring wheat North Dakota still has 6% of the crop to get into the ground.

Japan is tendering Thursday for 124,000 MT wheat, of which 61,000 MT is US origin. The Taiwan Flour Millers Association bought 51,410 MT of uS wheat overnight.

It turns out that some cheeky little chappies have been buying Russian feed wheat and shipping it to Egypt whereupon it magically becomes milling wheat.

No wonder that certain Egyptian trading companies were winning the tenders by $10-20/tonne on a regular basis.

There's likely to be some severely slapped wrists over this lot at the very least. I wonder how come this has only come to light now? I don't imagine somehow that this was the very first time it had happened do you?

More likely someone in authority caught his missus "in flagrante" with a large Egyptian shipper. Or is it just me who thinks like that?

The upshot of it all seems to be that it has been agreed between the two countries that Egypt will no longer buy Russian wheat via third parties, and only accept official Russian state quality certificates.

Agriculture ministers from Russia, Ukraine and Kazakhstan are proposing to form a Black Sea grain pool, according to reports from the world grain forum in St.Petersburg.

"No time can be wasted. The market positions our countries have conquered in recent years, must be backed by serious investment in infrastructure, so a solid groundwork can be built to make grain from the Black Sea region competitive in the long-term perspective," Russian Agriculture Minister Yelena Skrynnik said.

Whilst the world's major exporters have seen their market share shrink in recent years, that of the Black Sea countries has grown substantially.

The United States' share in world trade contracted from 28% in 2008 to 20% in 2009, Canada's from 17% to 14% and Australia's from 16% to 13%, she said.

By contrast, the share of Russia, Ukraine and Kazakhstan has grown from 6% to 24% since 2000, she added, with Russia alone now accounting for 14% of world trade.

Landlocked Kazakhstan will be keen to join the party if it guarantees it access to the major Russian Black Sea ports of Novorossiysk and Tuapse.

A major new grain terminal at Russia’s Tuapse Commercial Seaport, one of the five largest ports in Russia, is due to open this month. The terminal is designed to handle 2 million tonnes of grain annually. Investment in its construction amounted to 1.7 billion rubles. The terminal will consist of a grain bunker with a capacity of 103,000 tonnes, a railroad station, and a berth for ships with carrying capacities of up to 50,000 tonnes.

Meanwhile, more than 3 MMT of grain was shipped from Novorossiysk in the first four months of 2009, a fourfold increase on the same period in 2008.

Back in the depths of winter however, over 35,000 undischarged railcars, including some loaded with grain, became grid-locked on the approaches to Novorossiysk and Vostochny Port, causing severe delays in loading vessels lined up at the quayside.

"On our part, we are prepared to create an 'infrastructure corridor,' using the newly formed United Grain Company capacities in an effort to combine our countries' grain exporting efforts."

Adding that it "may take one, or several, years to implement."

It will be very interesting to see how all this pans out, the Black Sea getting itself organised could be a scary thought for European (and US export hopes) a few years down the line. Exactly where all the cash is going to come from they aren't saying. If they'd have floated this idea eighteen months ago with wheat at record highs and money being thrown around like confetti then I'm sure it wouldn't have been a problem, Sir Ken Goodwin would have happily funded the lot.

Corn was seen 97% planted as of Sunday night, compared to 99% normally, but ahead of year-ago levels of 93% when seedings were even more acutely affected by excess rainfall. Illinois has caught up well at 93% done versus 99% normally, whilst Indiana still lags at 90% complete against 98% normally. That still amounts to 1.4 million acres in those two states alone, and the deadline for fully claiming the crop insurance has now passed. Nationally, 87% of the crop is emerged, compared to 94% normally, whilst the percentage of the crop rated good/excellent is down one point on last week to 69%.

SOYBEANS

Beans are seen 78% planted, compared to 87% normally and 76% a year ago. Illinois is still well behind at 59% done as opposed to 88% normally. The crop is 55% emerged, up from 36% a week ago, and actually ahead of the "normal" pace of 51%.

WINTER WHEAT

Winter wheat is showing at 5% harvested, compared to 10% normally at this time of year. The USDA say that nationally 44% of the crop is rated good/excellent, down one point from a week ago.

SPRING WHEAT

The spring wheat crop is 96% planted, compared with 100% normally at this time of year, up from 89% a week ago, but also behind last year's pace of 100%. In the top-producing state of North Dakota 94% of the crop is now in the ground, compared to 99% normally and 100% a year ago. We are now well past the cut-off point for farmers fully claiming on their crop insurance for spring wheat, and it must be highly questionable how much of the remainder will actually now go into wheat. Spring wheat crop conditions are running at 72% good/excellent, down one point on a week ago.

July soybeans closed at $12.32 1/2 up 7 cents, whilst November soybeans finished at $10.51 3/4, down 10 cents, further widening the old/new crop spread ever closer to $2/bushel. Nearby it's all about the tight old crop ending stocks likely to be projected at the lowest stocks to usage since 1968 on Wednesday by the USDA. China says it will import a record amount of beans in June, 4.62 MMT, although much of that will likely come from Brazil (maybe half?), that still leaves a fair old chink still expected to come from the US in light of the Argentine problems. An anticipated late harvest in the US this year will exacerbate the tightness in old crop supplies. New crop, conversely, has to be bearish with increased US plantings and sharply higher ending stocks for the 2009/10 marketing year.

Corn

July corn ended down 9 cents to $4.35 per bushel. A firmer dollar and weaker crude were negative influences for corn today, as too were falling equities and rumours that China will shortly begin auctioning off upto 15 MMT of domestic corn reserves. Ahead of Wednesday's USDA report there was an inclination to bank profits from the recent rally. Some intended corn acres will likely end up getting switched into beans, additionally the USDA may decide to drop 2009 yields a bit to reflect the generally late planting progress. That could also have a negative impact on 2009/10 ending stocks.

Wheat

CBOT July wheat ended down 23 cents $6.00 a bushel. Unlike the other two main market protagonists this upcoming USDA report isn't likely to be so significant for wheat. For now wheat is more of a follower, and today it followed the firmer dollar, and weaker crude and equities. Winter wheat production is expected to be tweaked slightly lower on Wednesday, whilst 2009/10 ending stocks may also be revised down a little. Argentine plantings are well behind normal, and comfortably set to be the lowest on record. Before we get to that, all eyes will be on US and European yields once the harvest gets into full swing. Very early US yields on winter wheat have been disappointing.

Paris November milling wheat closed down EUR3.75 at EUR154.00/tonne, and London November feed wheat ended down GBP3.50 at GBP126.75/tonne.

Large premiums for new crop over old crop months are continuing to discourage farmers from selling, even though export interest is scant.

Crop production and stocks estimates from the USDA on Wednesday may provide the market with some direction, but until then we are treading water.

EU weather has improved recently, with a bit more moisture around for some wheat crops that were suffering from drought. However traders are cautious about getting too carried away with yield prospects, particularly in Eastern Europe, where a combination of planting home-grown seed in soggy soils, lack of spring moisture and reduced inputs seems likely to see output cut quite sharply.

a stronger dollar, strangely, seemed to have little impact on EU wheat today, which was lower from the off.

US wheat futures were down in the overnight and CBOT markets as traders bank profits ahead of Wednesday's USDA report.

US farmers hoping to wrap up spring wheat plantings in North Dakota were greeted with weekend highs in only the 30’s and 40’s (ºF), compared to normal highs in the mid 70’s, say StormX.

Indeed, in Dickinson located in southwestern North Dakota, heavy snow was reported on Saturday morning as several cities in the state reported record low maximum temperatures for the month of June over the weekend.

It's going to be the end of the week before normal June temperature return, they say. By then it will surely be to late for anyone to seriously consider wheat planting? Tonight the USDA will report on spring wheat seeding progress across the US.

A firmer dollar and weaker crude oil, plus book-squaring ahead of Wednesday's USDA reports dragged the market into negative territory, although beans had been higher early on.

The dollar is up on ideas that US interest rates will begin to edge higher before too long, whilst crude oil is down almost $1/barrel to $67.52 as supply outstrips demand.

Traders are expected to bank some profits after solid gains in recent weeks ahead of the USDA report Wednesday. The USDA are widely expected to cut old-crop bean ending stocks from 130 million bushels last month to around 115 million this time round. Traders are undecided what the USDA will say with regards to old-crop corn & wheat stocks.

For new-crop reductions are expected for corn and wheat, with an upward revision for beans.

June 5th was the deadline day for farmers in Illinois and Indiana planning to plant corn to take the insurance money and switch to beans instead.

Before that, tonight we have the planting progress and crop condition reports to look forward to. Key data to look for in that is spring wheat plantings in North Dakota, and corn plantings in Illinois/Indiana.

China will import an all-time record 4.62 MMT of soybeans in June, after importing 3.96 MMT in May, according to the country's Commerce Ministry.

On the weather front the week ahead will see further drying for the newly established drought in C Minnesota, further moisture and some flooding in soggy Illinois and Missouri, and further cold weather in the WCB and Northern Plains, says Allen Motew of QT Weather.

Building heat will soon become an issue in the extended range for the Delta, southern Plains and southern Corn Belt while favorable moisture will cross the developing dry areas of Nebraska, SE Minnesota, Wisconsin and W Iowa, he adds.

Argentina remains dry and wheat plantings there continue to lag.

Wall Street is expected to open lower, following European and Asian markets, consolidating recent gains.

Milk Link has announced that it has agreed in principle to buy the Llandyrnog Creamery and its associated operations from Dairy Farmers of Britain, which went into receivership last week.

The agreement will be subject to the finalising of all necessary legal documentation and is expected to be completed by Friday 12th June at the latest.

Neil Kennedy, Milk Link Chief Executive, said: “This is great news both for Milk Link and the loyal staff and farmers who are at the very heart of the Llandrynog Creamery. The acquisition of Llandyrnog will complement our existing market leading cheese business and we believe will deliver, over time, substantial business benefits.”

Lets hope that the rest of the beleagured DFoB operation gets up mopped up equally quickly, and that the farmers involved all get alternative outlets for their milk asap.

The pound is lower this morning after Labour's poor showing in the Euro elections over the weekend. Following hot on the heels of a dismal performance in the local elections last Thursday.

With a series of high profile resignations and calls for him to resign gathering momentum, Gordon McBroon faces another week of pressure, if he can last that long.

All this uncertainty is prompting wide scale selling of the pound.

Meanwhile, the dollar is firmer, with traders betting that the Fed will raise interest rates sometime in the second half of 2009 as the US economy recovers. US payrolls in May fell by the smallest for eight months figures last week revealed. It sums the market up that, whilst not increasing, a slow down in the rate of fall is seen as bullish.

Wednesday sees the release of the USDA's latest musings on Supply & Demand and ending stocks. For 2009/10 they are expected to reduced corn and wheat production, partly due to a reduced planted area and also a cut in yield due to late plantings.

Soybean ending stocks for 2008/09 are expected to be cut further from last month's 130 million bushels, and although some trade estimtaes are that stocks will fall well below 100 million, nobody really seems to think that the USDA themselves will come up with a number that low:

The dispute between Egypt and Russia over wheat branded "unfit for human consumption" appeared to have all been sorted out last week after the Egyptian Minister of Trade and Industry, Rashid Mohammad Rashid, told reporters that there are no problems between the two countries with regards to wheat supply.

"I would like to make it clear that there are no problems connected with the deliveries of wheat between our two countries. There are problems only inside Egypt. They concern matters related to the conclusion of contracts and to monitoring," he was quoted as saying.

It would seem that there are indeed problems inside Egypt, so much so that one of the suspect cargoes brought into the Red Sea port of Safaga is to be sent back to Russia, with demands that the $9.6 million that GASC paid an un-named Egyptian trading house for the 52,500 MT cargo to be refunded immediately.

That presents somebody with a rather interesting problem does it not? I don't see the Russians rushing to take it back & offer a full refund. Indeed Rashid's comments suggest that the Russians might have shipped exactly what was bought.

It seems that a second Russian consignment is still being held in Safaga, along with 11,000 tonnes of Ukraine and Australian wheat near the Mediterranean port of Alexandria.

July soybeans closed at $12.25 ½, down 4 ½ cents. Soybeans made new weekly highs for the sixth week in a row this week, as old crop stocks remain at historically low levels. The USDA will tell us exactly how low they think on Wednesday, with the average trade guess as to what they will say being 114 million bushels, down 16 million from last month's estimate. A negative export sales figure on Thursday might help them make out a case that things won't get any tighter from here on in. I'm not convinced myself, especially with harvest likely running a good couple of weeks behind schedule. For new crop however the picture is undoubtedly bearish. US ending stocks will undoubtedly double for 2009/10, and Argentina can't have another disaster next time round can they??

Corn

July corn finished at $4.44, down 4 ½ cents. Corn had a volatile week but ended up closing higher for the sixth week in a row as uncertainty about eastern crop plantings. As well as reducing the planted acreage, the USDA may well also trim their yield estimate to take into account delayed plantings, when they issue their revised S&D and stocks estimates Wednesday. Before that we will have their planting progress and crop condition report Monday night. The dollar has been all over the place this week, which contributed to the volatility, although crude oil appears to have found a steady level around the $68/barrel mark.

Wheat

July CBOT wheat settled at $6.23, down 12 ¼ cents. The USDA are expected to trim US winter wheat production in Wednesday's report by around 6-10 million bushels, from last months estimate of 1.502 billion bushels. Ending stocks for 2008/09 and 2009/10 are also expected to be reduced slightly, although next week's reports are not likely to throw up any great surprises for wheat. Corn and beans are very much the central characters on Wednesday. Planting in Argentina remains well behind schedule with an estimated 30% reduction in seeded area likely, according to the Buenos Aires Cereal’s Exchange.

EU wheat futures finished a lacklustre session unchanged to slightly lower Friday, with November Paris milling wheat down EUR1.00 at EUR157.75/tonne, and London November feed wheat flat at GBP130.25/tonne.

It's been a volatile week, with some wild fluctuations in forex rates and in Chicago, but at the end of it all London November feed wheat finished just GBP0.75/tonne easier on the week, with November Paris milling wheat down EUR3.75/tonne overall.

The pound closed last week at $1.6184 against the dollar, peaked at $1.6660 on Wednesday before crashing to close at $1.5986 Friday, for a loss of around two cents on the week. The euro had a similar ride, closing last Friday at $1.4160, peaking at 41.4336 midweek before ending at $1.3965, thereby also posting a loss of around two cents overall.

US wheat futures also fluctuated quite wildly throughout the week, with Chicago July wheat up 37 1/4 cents on Monday, down 5 cents Tuesday, down 52 cents Wednesday, up 17 3/4 cents Thursday, and down 12 1/4 cents Friday!

With the markets behaving so erratically it's not hard to understand why both buyers and sellers alike seem to be preferring to stand aside until some much-needed direction emerges.

Maybe we will get it this week when the USDA release their latest S&D and stocks estimates?

At home, the HGCA this week estimated UK ending stocks for 2008/09 at a rather hefty 2.44 MMT.

About Me

Worked in agriculture for over 30 years as a shipper, merchant, trader & broker, but still hasn't got the faintest idea what he's talking about.
Likes beer apparently, so why not do the decent thing an hit the donate button you tight bastard?
He can also provide content for your website like market reports and commodity prices. And if you haven't got a website he can design one for you. In short, the man's a bloody genius.

Disclaimer

All comments on this website are the sole opinion of the author, and are not capable of nor intended to constitute professional advice. Neither can Nogger give any guarantee for the accuracy of any of the information or data contained within this site.

The guy is clearly deranged and you should almost certainly ignore everything that he says.